Negotiate to Win/Win

Negotiation Isn’t Confrontation Negotiation is about gaining something, possibly an advantage and giving something in return, but unlike confrontation, the successful negotiator never walks away empty handed.

Negotiation is Reaching an Agreement Reaching an agreement means you get some or all of what you want and the other party gets something in return.

In real negotiation, both sides feel that they are gaining something which is the basis for both parties to agree. This is called Win/Win.

Everything is Negotiable! Develop a mind set that that believes that everything is negotiable, that you can engage others in negotiation and that you will look past all of the signs that suggest otherwise such as price tags, policy statements, disclaimers and yes, commercial leases.

Five Keys To Successful Negotiating: Key #1  Look Beyond the Rules We Have Been Taught to Accept Often Without Question  Question any odd, unreasonable or unfair policy  Seek solutions that meet your objectives and the objectives of the policy/rule

Five Keys To Successful Negotiating: Key #2  Go Straight To The Top  You won’t get anywhere if you are talking to the wrong person  You have to figure out who the decider is  Say: I’ve gotten great service here. Who can I contact to tell them about it – That should open the door to the person who can make a decision

Five Keys To Successful Negotiating: Key #3  Don’t Get Angry – The First One To Get Mad Loses  Always avoid confrontation  You won’t get very far if the decision maker has to manage two problems – the negotiation and your behavior  Avoid putting the decision maker in the position of feeling that they are not-going-to-take-that- from-you mentality

Five Keys To Successful Negotiating: Key #4  Never Negotiate in a Crowd  Most negotiations should be ono-on- one affairs  Successful negotiation means someone is going to make a concession which no one like to do publicly

Five Keys To Successful Negotiating: Key #5  Give In Order To Get  Give away something or lesser value to you but of greater real or imagined value to the other party  Sometimes giving something intangible like recognition or praise to get something tangible work  Other times give something tangible the other party will value but that you can do without

Think Solutions  Start by looking for the things, tangible or intangible the other party wants, needs or might value  Identify the likely problem or barriers to a successful negotiation  Think of the solutions – be a problem solver – be creative but not too creative

Commercial Lease Negotiations In Washington there is no applicable landlord tenant law that sets out what is fair or unfair or what is required in a commercial lease. The law is what the lease says in writing when both parties sign it

Commercial Lease Negotiations That means that everything in a commercial lease really is negotiable – even though a landlord or property manager may imply or state that it is not

Your Business Plan is the place to start–can you afford the lease? MARGIN MANAGEMENT GoodBad COGS25%50% Payroll 10% 30% Lease10%15% Other10%15% Total 55%110% Left for you or debt : 45% -10

WHY KNOWLEDGE OF LEASING IS IMPORTANT TO BUSINESS OWNERS ON THE TOPIC OF ATTORNEYS  Attorneys practice law. They are typically not trained in business skills.  Business Owners practice a separate set of business skills and are typically not trained in the law.  In the end the business owner has to determine what is the right course for his/her business.  An attorney does not sign a contract. Only the business owner does.

What is the role of the real estate broker? Real estate brokers are very highly trained sales people whose primary job is to locate qualified tenants and get them emotionally involved with the space being offered. This puts most small business owners at a disadvantage

What are the elements of the Letter of Intent?  TENANT & PREMISES  DISCLOSURE OF FINANCIALS AND BP  USE OF THE PREMISES  LEASE & RENT COMMENCEMENT  RENT - OPTIONS TO RENEW  DEPOSITS  ADDITIONAL RENT  LANDLORD’S & TENANT’S WORK/HVAC  TERMINATION RIGHTS/GUARANTEE  PARKING/SIGNAGE, ETC

What are the areas of common dispute between a Landlord and a Tenant after the lease is signed?  HVAC MAINTENANCE, REPAIR & REPLACEMENT AND TEMPERATURE CONTROL  PARKING FOR STAFF AND GUESTS  AND - MONEY

What is worth negotiating in a commercial lease?  RENT  OPTIONS  LANDLORDS WORK  TENANTS WORK  TI ALLOWANCE  LENGTH OF TERM  LENGTH OF PERSONAL GUARANTEE (TIME)  AND………..

What are the important language elements in a lease?  What legal entities is the lease between?  Is there full or modified NNN?  How much money will be due at lease signing?  What are the various dates involved: Lease commencement, possession, rent start, termination, window to renew?  What is the allowable use?  Alterations, Repairs, Signage, Assignment?  What are the insurance requirements?

What is a personal guarantee and does the tenant have to sign it?  IT DEPENDS ON WHO THE PARTIES THE LEASE IS WRITTEN BETWEEN ARE  IT CAN BE NEGOTIABLE IF THE TENANT IS AN ESTABLISHED CORPORATION OR LONGSTANDING COMMUNITY BUSINESS  THE LENGTH OF TIME OF A PERSONAL GUARANTEE CAN SOMETIMES BE NEGOTIATED IF ALL OTHER FACTORS ARE STRONG

What happens if I default on any of the terms of the lease?  Typically when the default happens the Landlord has the choice to file a lawsuit. If he does he will engage an attorney who goes to the court to file the suit. The attorney will hire a process server who will have the defendant(s) served in person. The defendant will have 20 days to hire an attorney and file a response with the court.  And…………

Q & A Steve Burke Washington SBDC – Seattle/Tukwila